Friday, March 12, 2010

Proposed Regulations for Expediting Contract Closeout - Part 2

Today we will finish up our coverage on the Government's proposed regulations designed to expedite the contract closeout process. To read Part 1, click here. As we stated earlier, cost reimbursable contracts typically take a lot of time and effort to close. Both contractors and Government auditors and administrators share the blame here, making closings a low priority and allowing the process to fallow until everyone involved in the contract have left, moved on or moved up. In an effort to speed up the process, the Government has proposed a series of FAR changes designed to remove some of the perceived impediments to a smooth process.

The most significant change (and also the most controversial change based on public comments to the proposed change) is the definintion of what comprises an adequate incurred cost claim. Recall from yesterday that one of the propsed changes required contractors to submit adequate incurred cost claims, not simply incurred cost claims. The proposal revises FAR 52-216-7 to define the term "adequate".

In order to be considered adequate, an incurred cost proposal must include all of the following (unless otherwise specified by the cognizant Federal agency official).
  1. A summary of claimed indirect expense rates
  2. General and Administrative (G&A) expenses
  3. Overhead expenses
  4. Occupancy expenses
  5. Claimed allocation bases
  6. Facility Capital Cost of Money (FCCM) calculations
  7. Reconciliation of books of account and claimed direct costs
  8. Schedule of direct costs by contract/subcontract and indirect expense applied at claimed rates and the Government's participation in each indirect rate pool.
  9. Schedule of cumulative direct and indirect costs cliamed and billed
  10. Subcontract information
  11. Summary of hours and amounts on T&M/labor hour contracts
  12. Reconciliation of total payroll to total labor distribution
  13. Listing of decisions/agreements/approvals and description of accounting/organizational changes
  14. Certificate of final indirect costs
  15. Contract closing information for contracts completed during the fiscal year.
In addition, the clause lists 17 other items/schedules/reports that may be submitted together with the foregoing items, stating that these additional items will be required during the audit so contractor's might as well prepare and submit them along with the required items.

Many of you will recognize this list as coming from DCAA's electronic incurred cost excel model (ICE) or its paper version Information for Contractor's Phamphlet (DCAAP 7641.90).

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